Carnival of Wealth, Perseid Meteor Shower Edition

August 12, 2013

It’s raining glowsticks! Hallelujah!

It’s happening RIGHT NOW! Look outside your window! (Please wear a helmet.) The Perseids – called such because they come from the constellation Perseus – are visible around this time annually. Look in the right part of the sky during the right time of day (early, early morning) and you can see a meteor every minute. Helps if you live in the Northern Hemisphere, too.

On with the show. We checked the archives, and Barbara Friedberg hasn’t stopped by since last June. She’s back with a primer for building wealth in 15 minutes a day. Specifically, she’s talking to the people who’d rather do absolutely anything else in the world than experience the tedium that is thinking about money. Think about it this way: keeping a ledger and collecting financial statements may not sound like fun to most of us, but the benefit to doing so is down the road. You like delayed gratification, don’t you?

Pauline Paquin is an inspiration to anyone who dreads the idea of exchanging a few hours of life every day for a paycheck from an employer. The woman behind Make Money Your Way (among others) argues that if you own a house, and have at least one bedroom you’re not using, you’re denying yourself an chance to earn. Personally, we at CYC would rather sleep under a bridge than live with strangers, but the opportunity to turn your domicile into cash flow still exists for those of you who are less fussy about who you live with. Now to start charging our cats rent.

[Post from something called FrugalPortland.com rejected. As we told the submitter, “We’re going to do you a favor and not run this. We have standards here.]

FI Pilgrim at FI Journey (it stands for “financial independence”) has maybe the saddest opening line of a bio we’ve ever seen:

FI Pilgrim has been working his way towards middle management since he was 16 years old.

Hell is nothing but questions like the one Daniel at Sweating the Big Stuff poses this week: “Would You Gain 25 Pounds To Get Rid Of Your Debt?”

It’s similar to a question someone asked Drew Magary at Deadspin last week: Would he wear a single rollerblade for the rest of his life, or have sex with his mother once? (“I’d try the rollerblade for a few days, then get frustrated, give up, and go for the incest. Sometimes, you have to do what’s practical.”)

Alright, the questions are only superficially similar, but Daniel’s was more than just a mental exercise. Incredibly, he said he’d stay with the $50,000 student loan hit he’s incurred over temporarily blowing up. (Note: Daniel is $50,000 in the red? We had no idea. To his credit, his site does more than just obsess over his debt.) Some people left inane comments (but we’re being redundant), e.g. “The answer to this question is different for everyone”, “Very interesting!” and “Well, it depends. lol”, but the question did spur us to answer it. Hypothetically, of course, since we’re not carrying any debt.

Give us the corpulence. For most people, erasing 25 pounds is far easier than making $50,000 in debt disappear. Heck, if you train hard enough outside on a hot summer day it’s possible to lose 10 pounds and make it 40% of the way to your goal right there, whereas earning $20,000 in a single day is beyond the capabilities of most of us. Then again, that’s in theory. As a rule the people who are undisciplined enough to pay down their debts are the same ones who are undisciplined enough to stay fat.

He’s being funny, right? Evan at My Journey to Millions asks if you have a right to decide your kid’s college major. You do, because Junior almost certainly isn’t paying out-of-pocket. And if your kid is paying out of pocket, then congratulations: you’ve raised someone extremely responsible. Who thus, by extension, has earned the right to study whatever. Which, because she is responsible, is almost certainly going to be something with a high return on investment. No one who spends the summer working her tail off to pay the next year’s tuition is going to major in comparative literature. Or photography.

Or you could insist on trade school, which would not only be easier for your kid to pay his own way for anyway but would offer a more promising return than a liberal arts degree.

Matt Becker of Mom & Dad Money asks if peer-to-peer lending will supplant banks and other financial institutions. Well, we’re exaggerating, but you get the idea. Banks do a little more diligence than Lending Club does, which is why bankers are rich and people throwing their money around on the internet are not.

Start saving early, and by 65 you’ll be piloting your own yacht to Norway and eating solid-gold lutefisk. We’re told to believe some version of that, but Michael at Kitces.com points out that there’s more to investing than just biding one’s time for as long as possible. That’s because as you approach your retirement date (if you’re employing a conventional strategy), a greater chunk of your nest egg’s growth will derive from market returns. Should the market take a dive when you start receiving AARP mailings, you could be in for something unpleasant.

Even engineers get sick of the daily grind. Harry Campbell of Your PF Pro quit his job – on a Tuesday, no less – and says “being unemployed has been pretty awesome.” We can only hope that he left a pile of non-collated TPS reports on his boss’s desk before waltzing out the door.

To determine average return values over a number of years, Michael at Financial Ramblings uses the geometric mean (the xth root of the product of x items) as opposed to the conventional arithmetic mean (the sum of x items, divided by x.) You should too, if you want to account for volatility and not overestimate returns.

Dividend Growth Investor has made a career out of finding undervalued companies with strong fundamentals, that pay high dividends. Can you do the same? Theoretically, maybe. But as he stresses, there’s more to successful dividend investing than knowing how to consume data. Practice counts for a lot. He explains his rationale for several of his latest purchases, all of which sound more than reasonable to us.

Sandi at Spring Personal Finance sent her post this week with the caveat, “I fear I’m becoming strident.” To paraphrase First Daughter Alice Longworth, “If you can’t say anything nice, come sit with us.” Sandi’s latest pet hate is mutual fund salespeople who claim altruism and offer you “free” planning. Which is as “free” as the drinks in the casino are.

Finally, Jason at Hull Financial Planning reminds us of the mathematical certainty that not every startup business can be successful. No matter how thoroughly you work and how convinced you are that your idea is solid and will earn the trust and patronage of millions, you can’t control everything. Knowing when to cut your losses and start again – or even better, setting a deadline with secondary quantifiable goals for such – is as much the hallmark of a smart entrepreneur as anything is.

Thanks again for reading. New Anti-Tip of the Day tomorrow, new post Wednesday (possibly an original and not a paid one), and other new one Friday. Repeat until the end of time.

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